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There was a time when the Fed’s QE was, at least on paper, supposed to generate jobs (the broad inflation will come on its own, in due course). After all, the prospect of injecting $85 billion in liquidity into a market with the sole goal of pushing the stock markets that benefit the purchasing power of about 10% of the population would hardly have received broad approval even by the co-opted Congress.

So, to all those who still naively claim Fed is not the sole reason for the market’s relentless march higher, those billions in liquidity must go into the economy, and specifically into job creation, right?

As a result, we decided to back into what the average private sector job has ended up costing the US population in pure dollar terms (which in turn ultimately manifests itself in terms of unsustainable government debt and pent up inflation) via the Fed’s monetary pathway. Well, according to the ADP data released earlier, in which a paltry 130K private sector jobs were created in a month in which the Fed, as always, injected $85 billion, the bottom line came to a whopping $654K per job (since government jobs are always a net drain, we exclude those from the calculation). And taking the average job growth throughout 2013, this number, as can be seen on the chart below, is a laughter-inducing $553K!

Obviously, the above “analysis” is merely a placeholder to show just how absurd modern policy has become, and yes – we do realize that all of that money has ended up solely into capital markets boosting risk assets, as we have been saying since 2009 and as JPM, Pimco and BlackRock now admit.

However, since the next and final tool in the Fed’s arsenal is Nominal GDP targeting on the back of direct monetary injections whose purpose is to unanchor inflationary expectations, crush savers, and take the wealth effect to the next level (as we predicted would happen recently), perhaps instead of pretending QE even remotely works on the economy, Bernanke can finally make it rain, and just hand over half a million each month to every man, woman and child… and just brace for the Weimar collapse that would inevitable follow.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/9GhcPepRBmU/story01.htm Tyler Durden

By Phil Davis of Phil’s Stock World

Yes, a RISING channel!

That’s why we are long-term BULLISH but short-term BEARISH.  As noted by TraderStewie (chart credit, click on to enlarge), this is a movie we’ve seen before, with the S&P making a power-move to the top of the channel, only to find resistance there.  

 

 If we break out over that channel (for more than a spike), I will be HAPPY to play a new channel higher but let’s just make sure we get there first!  In this chart of the Equal Weight Index, each company is treated as 0.2% of the S&P to eliminate the distortions of runaway Momentum Stocks.

On our Big Chart (below), the S&P is already off to the races, over the 1,760 line (+10%) that marks the top of the range we’ve been following since early 2009. Overdue for a 10% correction is an understatement here!  

It’s very hard to quantify where we should be as the Dollar has been diving – all the way from 84.96 in July to 79.06 last week. That’s a 5.8% drop in the currency, which is the measuring stick we use to put a PRICE (not a value) on the stock market. In early July, the S&P was at 1,600 and, wouldn’t you know it, 1,760 is EXACTLY 10% over that line (the Must Hold line on our Big Chart).  

 

The Federal Reserve’s stance on QE makes its announcement tomorrow at 2pm so important. Its actions will determine whether or not the Dollar is bottoming here and, if the Fed is not looser than it has been, we are likley to see the Dollar move back over 80, most likely to 81, which is a 2.5% move up in the Dollar. There is is roughly a 2:1 relationship between the Dollar and the indices, so if the Dollar moves up 2.5%, I think we’re looking at a 5% pullback in stocks. Oil and other commodities might also begin to break down against a stronger Dollar.

As it stands, these are the last few POMO days of the month and the Fed has already blown through over $50Bn in October (out of $45Bn it is supposed to spend on Treasury Purchases). The Fed has nothing left to contribute in the last few days other than a couple of Billion they found in the couch cushions. We don’t get the new schedule until 3pm on Thursday, but yesterday’s $5Bn injection was essentially it for the week.  

We got a bit shorter on the Nasdaq into AAPLs earnings last night, in case it disappointed.  AAPL did come through with strong numbers and gave a pretty good conference call so we’re very happy with our long AAPL position but still happy we took the money and ran on our bullish QQQ spread in our Short-Term Portfolio. 

So we’re going to be liking both the S&P’s 1,760 line (/ES) and the Russell’s 1,120 line (/TF) for shorting spots in the Futures. Very simply, we play those lines bearish with tight stops over the line, hoping to catch a good move down. It’s going to be tricky today and tomorrow as there will be rumors flying about what’s going on in the two-day Fed meeting but the Dollar is rising and, as long as it’s over 79.50, we should be getting a bit of market correction. 

We’re NOT playing oil short, other than our standing SCO spread in the STP, until we see the inventories this week. We hit our $96.50 target last week and below that is $92.50 (after bouncing at $95, of course) and, below that is $87.50 and below that is what oil would be trading at if not for all the shenanigans at the NYMEX – $82.50!  That’s the VALUE of oil based on supply/demand and cost of extraction in today’s economy – the rest is just fluff. Still, there’s plenty of fluff and professional fluffers at the NYMEX to keep prices pumped up but we may be approaching a major breakdown here – especially if the Dollar gathers strength.  

China is going the oppositie direction, injecting 13Bn Yuan ($2.13Bn) into their money markets this morning in an attempt to keep their one-week repo rates under 5% after 9 consecutive days of gains. Their overnight rate hit 4.5% and that’s a deadly combo that prompted emergency measures today and probably did a lot to bounce the Buck. India went the other way, RAISING their key lending rate from 7.5% to 7.75% as they attempt to put a lid on inflation, which is hitting 6.5%, 30% over the RBI’s 5% target cap.  

This is what happens when Central Banks attempt to control the economy. In fact, there was only a brief period in which India had inflation under control – out of control is “normal” for India but the people have reached a breaking point – not good in a Democracy of over 1Bn people!  Of course, as you can see from charts of our own economic idiocy – it’s not good in a Nation with 300M people either.  Thank goodness we don’t have a Democracy or people would be pissed!  

It’s sad that it doesn’t matter what AAPL does or what FB does or what IBM does, etc. this earnings season. All that matters is what the Fed does tomorrow (now today), in Bernanke’s last meeting as Chairman. Conventional wisdom is that he will punt and leave policy changes to Yellen’s crew next year, assuming Yellen gets confirmed. I think it makes more sense for Bernanke to be the bad guy and call for a teeny, tiny taper – just to see how the market reacts – and then Yellen can “save us” if it doesn’t work.  

No way to call it though, we’ll just have to wait and see. 

Click on this link to try Phil’s Stock World FREE! 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/JexoUGrljds/story01.htm ilene

Another day, another broken market microstructure:

• *BATS OPTIONS HAS DECLARED SELF-HELP VS INTL SECURITIES EXCHANGE
• *NASDAQ OMX PHLX HAS DECLARED SELF HELP AGAINST ISE, ISE GEMINI

Perhaps we should rename the US equity (stock and options) markets – NasdaCare

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/JvwOV_42KE8/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

It's painfully obvious that real estate valuations are once again at asset-bubble extremes.

Correspondent Mark G. submitted a chart of the Wilshire REIT (real estate investment trusts) index that sums up the current real estate market in one image: it's painfully obvious that real estate valuations are once again at asset-bubble extremes, one that's even bigger than the last RE bubble that popped in 2008 with devastating consequences to the global economy.

Defenders of current real estate valuations can draw upon an array of justifications, but they boil down to the same one used to justify valuations in every asset bubble: this time it's different.

Is there anything in this chart that suggests this belief might be misplaced, for example, that credit/asset bubbles burst with a rough time/amplitude symmetry?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0mwaQUSBjpE/story01.htm Tyler Durden

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

It's painfully obvious that real estate valuations are once again at asset-bubble extremes.

Correspondent Mark G. submitted a chart of the Wilshire REIT (real estate investment trusts) index that sums up the current real estate market in one image: it's painfully obvious that real estate valuations are once again at asset-bubble extremes, one that's even bigger than the last RE bubble that popped in 2008 with devastating consequences to the global economy.

Defenders of current real estate valuations can draw upon an array of justifications, but they boil down to the same one used to justify valuations in every asset bubble: this time it's different.

Is there anything in this chart that suggests this belief might be misplaced, for example, that credit/asset bubbles burst with a rough time/amplitude symmetry?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0mwaQUSBjpE/story01.htm Tyler Durden

In yesterday's stage-setting drama, "coming in mid-November" replaced of the often heard "plead the fifth" as response of choice for Marilyn Tavenner (CMS Administrator). Today brings the main event, amid another server crash, as Kathleen Sebelius (HHS Secretary) takes the stand to explain healthcare.gov's shortcomings and how great it will all be at some point in the future if we just have some patience, spend a few more billions of taxpayer money on lines of code, and ignore the fact that the website is just the start of the problems with Obamacare… Her initial remarks (released early – below) are almost exactly the same as her testimony to Congress (and a carbon copy of Tavenner's remarks): “I want to assure you that HealthCare.gov can be fixed, and we are working around the clock to give you the experience that you deserve.”

 

Tavenner's remarks yesterday:

 

Via FOX,

Sen. Lamar Alexander, R-Tenn., speaking on the Senate floor, called Tuesday for Sebelius' resignation. Alexander is the top Republican on the Senate health panel.

 

"Mr. President, at some point there has to be accountability. Expecting this secretary to be able to fix what she hasn't been able to fix during the last three-and-a-half years is unrealistic," he said. "It's throwing good money after bad. It's time for her to resign — someone else to take charge."

 

…

 

In written testimony released ahead of today's hearing, Sebelius vowed to improve the website and said the consumer experience to date is "not acceptable." But she defended the law itself and said extensive work and testing is being done.

 

"We are working to ensure consumers' interaction with HealthCare.gov is a positive one, and that the Affordable Care Act  fully delivers on its promise," she said in the prepared remarks.

 

Sebelius blamed the website contractors and the "initial wave of interest" for the glitches, but expressed confidence in the experts and specialists working to solve "complex technical issues."

 

"By enlisting additional technical help, aggressively monitoring errors, testing to prevent new issues from cropping up, and regularly deploying fixes to the site, we are working to ensure consumers’ interaction with HealthCare.gov is a positive one, and that the Affordable Care Act fully delivers on its promise," she said.

 

Live Stream:

Live streaming video by Ustream

 

Full statement from Sebelius:

 

HHRG-113-IF00-Wstate-SebeliusK-20131030.pdf

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/aw6u7O0x3ug/story01.htm Tyler Durden

If there was another reason for the Fed to keep its foot ‘through’ the floor, it is the fact that despite a record growth in the Fed balance sheet YoY, CPI (ex food and energy) dropped to 1.7% and missed by its biggest margin in 14 months. This is the 2nd lowest print in two-and-a-half years. Perhaps most dismally, real hourly wages rose at only 0.9% year-over-year – around half the rate of inflation. Overall, energy costs rose the most MoM (+0.8%) while Apparel fell 0.5% MoM (its biggest drop in 6 months as we suspect the JCP-driven sales deflation has begun already); and given Sebelius’ testimony today we note that healthcare costs are up 2.4% YoY (almost triple the rate of wage increase).

CPI YoY Ex Food and Energy saw its biggest miss in 14 months…

 

As overall CPI also dropped with Energy and utilities costs rising the most…

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/_xVQxN0CGbs/story01.htm Tyler Durden

As we mentioned earlier, if there was one thing that would guarantee an 1800 print in the Stalingrad and Propaganda 500 index today, it was a 0 or negative ADP print. Well, it wasn’t that bad. But it was close: with a paltry 130K private jobs created in October, this was a monthly plunge in private (i.e. non-government) payrolls, well below expectations, and substantially lower than the September 166K print which also was revised lower to 145K. It was also the 4th consecutive monthly decline starting with a 190K print in June, and it’s all downhill from there. Finally, this was the 7th ADP miss in the past 8 months. We can’t wait as the spinmasters do all they can to explain how private payrolls were affected by a government shutdown.

Broken down by jobs, while there was finally a pick up in manufacturing (+5K), and Construction (+14K) jobs, this was more than offset by the best paying jobs of all, Financial Activities, which dipped by 5K in October, in line with the wholesale termination of every banker dealing with the mortgage banking loss center.

Blame Obamacare: the small firms showed the smallest job gain in 10 months, medium-sized firms: smallest gain in 14 months.

Report highlights:

From the ADP press release:

“According to ADP National Employment Report findings, the U.S. private sector added a total of 130,000 jobs during the month of October, well below the average of the last twelve months,” said Carlos Rodriguez, president and chief executive officer of ADP. “Small business growth was down from the previous month, while payrolls among large enterprises showed an increase.”

And of course: here comes the government shutdown blame. Quote Mark Zandi, chief economist of Moody’s Analytics, said, “The government shutdown and debt limit brinksmanship hurt the already softening job market in October. Average monthly growth has fallen below 150,000. Any further weakening would signal rising unemployment. The weaker job growth is evident across most industries and company sizes.”

Someone please tell Zandi private jobs are not, well, non-private. Ah, forget it.

This is what a New Normal non-recovery looks like:

How ADP compares to BLS:

 

Total Nonfarm Private Employment by Company Size

Jobs by Industry:

 

Finally, thanks to the ADP being the most socially-media friendly jobs release organization, here is their October infographic:

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/7AswBjXhlsY/story01.htm Tyler Durden

I present to you a video that clearly demonstrates that intelligence has nothing to do with age, as 16-year-old Pakistani teenager Malala Yousafzai demonstrates far more compassion and wisdom about the topic of war than POTUS Barack Obama, who remains nothing but a sock puppet for European and Wall Street banking interests that control the US Central Bank and direct all “war-profiteering-for corporate interests” efforts. When she was just 14-years-old, the Taliban boarded a bus in Pakistan that Ms. Yousafzai was riding and shot her in the head for campaigning for a woman’s right to education. Since then, Ms. Yousafzai has shown remarkable courage, refusing to back down to the Taliban.

 

When asked what she would do if the Taliban came to kill her again, Ms. Yousafzia provided a most remarkable and courageous answer:

 

“I would reply to myself, ‘Malala, just take a shoe and hit him. But then I said, ‘If you hit a Talib with your shoe, then there would be no difference between you and the Talib. You must not treat others with cruelty and that much harsh[ness], you must fight others but through peace and through dialogue and through education.’ Then I said I will tell him how important education is and that ‘I even want education for your children as well.’ And I will tell him, ‘That’s what I want to tell you, now do what you want.'”

 

Just a few months into Barack’s first term as POTUS, I penned an article, “8 Reasons Why the Obama Administration Will Not Solve This Crisis By the End of 2009” due to the fact that “President Obama’s cabinet appointments [did] not reflect, in the slightest manner, the enormous change that he spoke of during his campaign.” As absurd as that article title sounds today, many in the mainstream media were in the midst of a full-blown love affair with the then newly appointed (versus elected) President and some had illogically suggested that the POTUS would solve the Wall Street-created crisis by the end of his first year in office. Diametrically opposed to this mountain of propaganda, I warned a few months into Obama’s term: “Don’t let President Obama’s professed anger regarding the $165 million of bonuses slotted for AIG executives fool you.” With politicians, lies come as naturally to them as breathing, and one most be careful to judge a politician’s character by his or her actions, not his or her words. Why do I bring this up? Because bankers are inextricably linked to all major conflicts over resources that take place around the world, as US Brigadier General Smedley Butler so clearly described in his book “War is a Racket”. In the 1930s, after General Butler realized that he was being used as a pawn for the benefit of Wall Street interests, he declared, “I believe in making Wall Street pay for it, taking Wall Street by the throat and shaking it up.” But here we stand today, more than 80 years later, and Wall Street is still making us pay for all of their sins.

I truly hope this video makes it to the desktop of the POTUS himself, as he could learn a lot from Ms. Yousafzai to re-think his drone policy, and use education, as suggested by Ms. Yousafzai, to fight terrorism instead of ordering drones to drop bombs that many times end up killing innocent women and children, and instead of defeating terrorism, only serve to fuel more future retaliatory terrorism. To compound the errors of his drone policy, the POTUS has simply resorted to imprisoning journalists that know the truth about innocents murdered by his drones to prevent the world from learning the same truths.  In fact, the Obama administration interrogated, beat, and told Yemeni journalist Abdulelah Haider Shaye “we will destroy your life if you keep on talking about [the US drone massacre of 14 innocent women, five of whom were pregnant, and 21 innocent children, the youngest who was 2-years old]” that occurred in Al Majalah village in southern Yemen in 2009. Perhaps it’s time for an undeserving former Nobel Peace Prize winner to learn a thing or two from the young girl that should have won the Nobel Peace Prize this year – the wonderful and brilliant Malala Yousafzia.

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/MxbMML1I8bU/story01.htm smartknowledgeu

Remember when minutes before the September FOMC announcement everyone was absolutely certain the Fed would announce tapering, only to leave a lot of very angry traders fuming? Fast forward one month when everyone is absolutely certain, again, that there is no way the Fed can announce anything even remotely suggesting a taper. One wonders though: since the Fed has by now burned all credibility bridges, and since the capital market bubble is now far greater than it was when both Stein and Bernanke, implicitly, warned about a building asset bubble (a chorus which has now been joined by JPM, Pimco and BlackRock) in early 2013, would today not be the best opportunity for the Fed to once again stun the market with a dramatic policy U-Turn, just to teach those momentum wave-riding vacuum tubes who is in charge? Probably not. However, as Lloyd Christamas noted, there is a chance. Deutsche Bank’s Jim Reid explains why.

So will today’s FOMC be as surprising to the market as the September meeting? Almost certainly not but you can’t completely rule out a small taper for the following reasons: 1) In the September meeting a large majority of FOMC participants expected the taper to start before December; 2) the fiscal situation has been kicked down the road for a while; 3) financial conditions have arguably eased since the last meeting with rates lower and equities higher and 4) many of the members won’t be on the committee into next year and may want to make a statement before leaving; and 5) they may feel a little bruised by the market’s verbal reaction last time.

 

Overall we continue to think the Fed are trapped to a large degree by the liquidity they’ve provided financial markets over recent years which could destabilise assets if they reversed course without a strong economic recovery. Indeed the current data uncertainties is probably the biggest reason for holding fire at the moment, especially so soon after the shutdown. Indeed our view is that the Fed may have to adjust their criteria for tapering if they want to make regular cuts to QE in 2014. We’re not sure how employment is going to suddenly pick up at this relatively mature stage of the cycle.

 

However when all said and done, the Fed do seem to want to taper and although we think they won’t until well into next year, we can’t help but think that the Fed are currently unpredictable enough at the moment that we need to be vigilant tonight and indeed in December. The story of the next 6 months could be very little tapering but a swing between liquidity complacency and liquidity fear. Maybe we’re veering towards the former at the moment. DB’s Peter Hooper expects today’s FOMC to be most likely a “wait and see event” though he sees the case for a taper now is about as strong as it was in September when it was a very close call.

To all of the above we add one more reason: the following headline from the Chinese Ministry of Commerce, which hit earlier.

• MOFCOM: U.S. POLICY CHANGE MAY CAUSE CAPITAL SWING FOR CHINA.

And so, just like in 2011, China is once again openly complaining about QE (and, tangentially, the inflationary implications it has on the Chinese economy). Recall that it was the soaring Chinese inflation in 2011 that sent gold from roughly where it is now, to all time highs. So if we have a repeat, even as the entire world is now effectively begging Mr. Debtfire to taper, will the BIS’ gold selling team headed by Michael Charoze out of Hong Kong be able to contain that one last remnant of the Fed’s idiotic monetary policies? Stay tuned.

As for today, our personal hope is no taper now… or ever. After all, the faster the Fed proceeds to monetize everything, and in unlimited amounts, the faster this centrally-planned charade finally ends.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/RhYULJNkvKg/story01.htm Tyler Durden